Sustainability

Volume 31 Number 1

Fall 2008

Stephanie and Ken Richards

Laws and Nature

by Karen Garinger

The day before speaking at a conference sponsored by the Indiana Center for Coal Technology Research, Ken Richards is keeping a close watch on a new climate-change bill in the U.S. Senate. The representatives from Indiana's coal industry attending the conference will be looking to hear his thoughts on the bill's most recent developments.

Richards, an associate professor of public and environmental affairs, and his wife, Stephanie Hayes Richards, an independent energy and environmental consultant, have a special interest in this climate-change bill, known informally as the "Boxer Bill" (after Sen. Barbara Boxer, majority chair of the Senate Committee on Environment and Public Works and backer of the bill). It is one of three comparable pieces of major climate-change legislation up for consideration in Congress during the summer of 2008. In Ken Richards's opinion, the Boxer Bill is the one that comes closest to getting it right, with its proposals for U.S. actions to achieve a 50 percent reduction in green house gas emissions from 2000 levels by 2050, a target set by the Intergovernmental Panel on Climate Change. In fact, some of the Boxer Bill's language comes straight from Ken and Stephanie Richards's own policy analyses.

"We noted that in terms of the point of regulation, for example, in regulating something like carbon dioxide emissions, you have to decide: Are we going to regulate the emitters--cars, houses, farms? Or do we regulate somewhere upstream?" Ken Richards says.

"Our recommendation was to go upstream," he continues. "We shouldn't regulate the users of fossil fuels because there are millions upon millions of them. Rather, we should regulate coal mines, natural gas processors, oil refineries, because nearly all of the carbon that comes out of them still goes out into the atmosphere. That way, we'll be regulating at a very concentrated point."

Ken and Stephanie Richards's detailed assessment of the Boxer Bill can be found in a draft report under the title "The Evolution and Anatomy of Recent Climate Change Bills in the U.S. Senate: Critique and Recommendations." The report was commissioned by the Sen. Richard G. Lugar. Richards is also associate director of the Lugar Center for Renewable Energy, which receives guidance from the Indiana senator and is located on the Indiana University–Purdue University Indianapolis campus.

The main reason that Ken Richards would like to see the United States adopt a climate policy that has the strong points of the Boxer Bill--or something like it--is not because he perceives the climate as being on the brink of catastrophe. He is more concerned about the day-to-day chaos that exists in the field of energy production and consumption in the current state of regulatory uncertainty.

Until policies regarding energy production and consumption become solidified, he says, "new energy projects are being held up. I think we need to create an environment in which energy businesses can make informed investment decisions."

Consider, for example, all of the questions surrounding emission caps and trades. Richards says it's almost certain that any climate change policy the United States implements will contain provisions for the cap-and-trade approach, which is widely considered a sound, market-based solution for dealing with emissions.

Under such a system, the government sells or gives pollution allowances to greenhouse gas emitters, but also allows them to buy extra allowances from sources that are theoretically under-emitting. In theory, this leads to the most cost-effective pollution abatement.

Another way that polluters can obtain more emission allowances is to undertake projects that decrease net emissions--projects that fall outside the range of regulated pollution sources. Though popular with politicians and businesspeople, these "emission offsets" raise significant questions, Richards says. Foremost in his mind is how to verify that those selling credits are truly entitled to do so--that what they are selling really represents pollution reductions.

His recommendation for substantiating claims about the value of greenhouse gas credits is to conduct rigorous testing of proposed methods by three independent panels of experts. "If we find that their results are quite close to one another, then we can have a fair amount of confidence in those methods," he says. "If they're not within, say, 10 percent of one another, then we have a problem."

If offset programs are not established under such sound measurement principles, Richards says, these programs can be worse than worthless--they can actually end up increasing overall emission levels.

Meanwhile, he says, despite a lack of universal standards for independent verification, certain companies are already making "bundles of money" by brokering emission credits. Ken and Stephanie Richards recently wrote an editorial for the Times of Northwest Indiana that criticizes Congress for doing business with one such company, the Chicago Climate Exchange (CCX), in an attempt to make Capitol Hill a "carbon-neutral" zone (that is, essentially emitting no carbon dioxide).

"When questioned about issues such as baseline carbon dioxide emissions and carbon calculations, CCX officials have been elusive or dismissive," they write. "Requests for copies of the offset evaluation manual have gone unanswered. And while the CCX does employ a 'third-party-verifier,' a kind of carbon accountant, the rules by which projects are evaluated are not made public. Perhaps this is why numerous key players in the environmental movement have been skeptical of the organization's real impact on CO2 emissions. Nonprofits like the Natural Resources Defense Council and the Nature Conservancy and companies like BP have maintained their distance from the CCX."

Uncertainty about the reliability of credits is not the only threat to a successful offset program. In the "Evolution and Anatomy" report, Ken and Stephanie Richards assert that the government risks undermining such programs if, after selling pollution allowances, it then undercuts its effectiveness by subsidizing use of the greenhouse-gas-producing fuels it is trying to discourage.

"One of the primary advantages of cap-and-trade systems … is that they use prices to allocate CO2 emissions to their highest valued users--they promote economic efficiency even as they protect the environment," write the Richards.

"Consequently, Congress should be careful to avoid provisions that might compromise the power of the price signal." ("The price signal" is a term for the message that the price of a commodity communicates to its producers and users about the commodity's availability and desirability.)

Throughout his career, thinking about how to deal with excess CO2 has formed a major portion of Ken Richards's research and consulting activities. This field, known as "carbon sequestration," can be divided into two types of endeavors: One is increasing biomass (growing more forests and crops), and the other is carbon capture and storage (the highly technical processes used to move industry-generated CO2 into mitigation systems). Capture and storage methods have evolved from technologies that were developed in the petroleum industry.

In the area of biomass augmentation, Ken Richards's research was making an impact as far back as the term of the first President Bush. At the time, Richards was a law student working for the Council of Economic Advisers, and he used U.S. Forest Service data to construct a model for planting trees to neutralize CO2 pollution. The recommendation made it into President Bush's State of the Union address as a plan to plant 1 billion new trees.
Richards is unsure whether that goal has been met, but these days, officials are more likely to ask him about CO2 capture and storage than about increasing biomass. "I used to get maybe two calls a year about capture and storage," he says. "Now it's more like two a month."

The questions have local significance. Currently, he says, Indiana is uniquely positioned to make important advances in this form of carbon sequestration, with the planned construction of Duke Energy's coal gasification electrical plant in Edwardsport. The coal gasification plant will use state-of-the-art methods to produce electricity from coal without the coal being burned. Richards is working with a number of state and private parties to identify important regulatory, legal, and economic issues related to the adoption of this approach to environmental protection.

"There will be cost issues," Richards says. "Carbon capture and storage could substantially increase the cost of electricity. But if we're going to build a gasification power plant anyway, then capture and storage can be cost-effective." In this process, it is proposed that the CO2 will be converted to a semi-liquid state and pumped into kilometers-deep geological formations that are packed with porous substances such as sand to absorb and disperse it. Leaks and unintended spreading of the CO2 will require tracking and abatement, Richards says. "Though CO2 is considered an air pollutant," he adds, "managing it in this way is not generally seen as polluting."

To succeed in this highly innovative attempt at CO2 management, Duke Energy and Richards will tap the expertise of a brain trust including geologists, economists, biologists, lawyers, finance professionals, and geographic information systems specialists. This interdisciplinary approach to solving environmental problems, Richards says, "is what I love about research."

Recently, Richards has brought his economic training to bear on the demand side of greenhouse gas-related issues. "So much environmental regulation is concerned with the supply side of energy resources," he says.

In their analysis of all of the currently proposed congressional climate-change legislation, Ken and Stephanie Richards note that the legislation "continues to reflect a technology-oriented, supply-side emphasis on mitigation of greenhouse gas emissions. Very little is offered in the way of understanding and changing consumer demand for polluting goods and services."

An "economics of happiness" should receive more attention, Ken Richards says. "To change how we think about consumption, we need to explore what we need, what makes us happy, how we educate our kids about living in a lower-carbon economy.

"We need to ask ourselves, ‘Why do we consume the way we do?'"

Karen Garinger is a writer and editor for University Ceremonies in the Office of the Trustees of Indiana University.